eBay Was the First One in India and Still Missed the Boat

eBay just gave its India business to Flipkart. One remarkable aspect about all this is the fact that eBay in fact was an early entrant on the Indian market. Ebay was the first international online retailer to enter India.

Long before the arrival of Amazon and Alibaba, or even the launch of Flipkart and Snapdeal, it was eBay that made a foray into Indian ecommerce with the acquisition of Bazee for US$50 million in 2004. “This agreement will allow eBay to expand its global footprint into the nascent but growing Indian market,” an eBay vice-president had then said.

A lot of water has flowed under the bridge since then. Flipkart launched in 2007 and Snapdeal in 2010. Backing from large hedge funds Tiger Global and SoftBank sucked them into a race to grab market share with discounts. The entry of Amazon in 2013 ushered in an era of broad-based horizontal marketplaces.

The eBay model, which originally connected buyers and sellers in auctions, got pushed to the periphery with the broader range of categories on Amazon and Flipkart as well as the discounts. eBay India’s revenue growth actually slowed down in the boom years of 2014 and 2015, even as the main ecommerce players had their revenues rocketing, along with mounting losses bankrolled by hedge funds. […]

It’s too late in the day for eBay to adapt its model to India even if it wished to emulate Amazon. Jeff Bezos made no secret of his commitment to the long-term potential of the Indian market, and made several visits to India to get Amazon India’s act together. He had no hesitation in getting into a bruising war of discounts, even if it impacted Amazon’s bottomline in the short term.

eBay’s commitment to India was modest in comparison, and its platform model of connecting buyers and sellers was no match for the various initiatives Amazon and Flipkart took to onboard sellers and shift customers to online retail. Parking eBay.in in Flipkart was the only face-saver left for the first global ecommerce player to set foot in India.

So, in the early noughts, eBay made the right (if slightly premature) decision to enter what is now the most fought over e-commerce market in the world. And then, –as with everything at eBay– beginning in the latter half of the noughts, the company lost the plot.

Devin Wenig: The process started almost a year ago with us looking at the Indian market and seeing who was winning and who was losing and what the next few years were going to be like. We were evaluating both eBay India and Snapdeal.

​eBay saw a consolidation coming to the Indian market and wanted to concentrate its bets on what the company saw as the contender to most likely survive Amazon. (My words.)

​It is painfully obvious in Wenig’s words that they don’t see Snapdeal to matter much in the future (poor eBay even backed the wrong horse):

The conclusion was there weren’t going to be 10 winners, but maybe only one or two. And Flipkart — given all of that — was the natural party to align with. […]

I would say we still own five percent of Snapdeal and it’s not like we’re giving up on them. But if I want to be in a market, I want to win. And I realize it’s not going to happen only organically through eBay, so partnerships are critically important.

​For eBay, the segmenting of the markets -India to Flipkart, eBay the rest- was most important to the deal:

How did the different parts of this deal come together: The investment, the sale of eBay India and the commercial agreement?

The second and the third were the driving force. We do things like the investment to solidify the commercial agreements. It wasn’t the other way around.

Putting the eBay India business with Flipkart will make it a bigger business, they’ll co-populate their inventory, share their buyers and just have more scale.

Then they can take their investment from us and Microsoft and Tencent and lean in on growth — healthy growth. They have a big war chest now to consolidate their fulfillment, and use eBay’s [gross merchandise volume] to have a great deal of scale.